Industry news

Sustainability 1: Meet your new customer
Older, richer and more aware of the environment

Sustainability is the new buzz-word in international retailing — this is the first article in our series on how this impacts on retailers, especially in clothing and footwear

Sustainability is an awkward word, but one you’ll hear more and more often in future. International shows like MAGIC and the OutDoor Europe Show have considered it important enough to make this the theme of their shows. Marketers the world over are using it to describe a new kind of consumer awareness. A Google search identifies more than 30-m entries.

So, what is it?

Sustainability describes a way of looking at the environment that goes beyond mere global warming.

A sustainable product is manufactured without harming the environment with toxic chemicals, without causing undue wastage in the manufacturing process and is more durable so that it is not readily discarded to take up landfill space. It is manufactured in an ethical way, without leaving too big a carbon footprint (having too much flying involved).

The first objection anyone involved in trade will make is that this is a wonderful ideal, but products will be far too expensive to sell.

In Europe especially, traders and suppliers are very concerned about the fact that retail growth has just about come to a standstill. According to researchers TNS Retail Forward, non-automotive retail growth in Switzerland in 2007 was 1.3%, Germany 2.2% and in France 2.9%. The US was slightly up on 5.2%, but at Frierichshafen it sounded as if everybody was expecting the real US retail crunch still to come. In contrast, emerging companies — starting with SA on 7.9% up to Nigeria with 12.8% and Russia with 15.4% — are trading much more robustly.

Therefore: if you’re already battling to sell, why make it even more difficult?

The interesting answer that is coming from researchers all over the world is that the new consumers WANT more sustainable products, and will pay for it (see box).

Rolf Pfeifer, a tourism expert who addressed a lecture series on sustainability at the OutDoor Show in Friedrichshafen, gave the example of a struggling hotel that became a trendy success when they turned environmentally friendly and marketed themselves as such.

“Ten years ago the customers were not yet ready, but they have become more critical the last few years and are better informed,” Andreas Bartmann, owner of Germany’s successful chain of Globetrotter outdoor stores, told a panel discussion at Friedrichshafen. “Customers now appreciate quality and are willing to pay for it. The retailer who wants to trade on economics only may as well close the doors now.”

But, unlike the Greenies of the previous decade, today’s sustainable customer is more driven by their own comfort and well-being than a passion to save the earth. They are not environmental activists, they are consumers who demand, and can afford, products that make them feel good (see box).

They don’t want to feel guilty about child labour when wearing a R1 000 garment; they don’t want chemicals used in the manufacturing of their footwear that will harm the workers; they don’t want a disposable fashion item that will fall apart mid-season, they don’t want to contribute to spoiling the pristine natural environment that gives them so much pleasure... and if they are in the process demanding exactly the kind of things that Al Gore pleads for, so much the better.

They have the confidence to ask questions about where and by whom garments havebeen manufactured. What’s more, they can afford to pay for these products and this kind of lifestyle.

These discerning consumers are also older — the older generation is fast becoming the biggest age segment of the European population, while the 18-24 age group, still so popular with retailers and marketers, is shrinking. In addition, the older consumer of today is more active than ever before. “The 60-year old of today is the 50-year old of the past,” says Prof. Edgar Kreilkamp, a freetime strategist from the University of Lüneburg.

The obvious objection a SA retailer will make is that it is fine for the sophisticated European and US markets — but the majority of the SA consumers can hardly afford the bare necessities and dare not think of luxuries. Besides, as the chart on the previous page shows, the majority of our population is still very young — below 35 — and do not show the same ageing trend as in Europe.

But, research from the UCT Unilever Institute of Strategic Marketing show that retailers who think like that are ignoring a market segment with an annual income of R300-bn. Although this 40+ urban consumer group only constitutes 6% of the population, they have 20% of the retail spending power in SA.

They dubbed these 40+ aged consumers, who fall into the LSM7 - LSM10 category, Prime Timers. They have the time and money to enjoy life and know what they want — namely, quality and a good lifestyle.

What makes them especially attractive to traders is that half of the 50-plusses say they are debt free and about 70% say they have settled most of their debts. Their income might be lower than when they were employed, but they are now more financially secure and are able to save and spend without caring about rising interest rates and school fees.

Even better, it is a market that has grown 10% since 2000 — mostly driven by the 29% growth in black diamonds who have joined the Prime Timers. They now make up more than 25% (about 500 000) of this market, says UCT’s Prof. John Simpson.

The report attacks many marketing myths and show that Prime Timers are confident, discerning and smart shoppers, they are techno-able, healthy and body conscious and have me time to shop.

The question is: what can you do to attract these Prime Timers to your store? We’ll give some tips in the next issue of Sports Trader.

Why should retailers care about sustainability?
Answers from international researchers

International trend research company NPD Group found: The number of people interested in environmentally sound clothes grew 300% over the past 5 years.

Rolf Pfeifer, of forum Anders Reisen, who promotes sustainability in tourism industry, reports on a German survey of 800 people:

» The customers who buy with awareness will in the next few years have 30% market share;
» 11% people surveyed said they are always aware where and by whom the clothing they buy are manufactured;
» 36% say they are occasionally aware where it is manufactured;
» 36% said they plan to pay attention to where garments are manufactured in future;
» 11% said they don’t care how and where it is manufactured, they only want to look good.

Prof Edgar Kreilkamp, a tourism and freetime marketing strategist from the University of Lüneburg, says:

» In Europe as many as 30-50% already belong to the consumer group that are aware of sustainability issues and changed their lifestyle accordingly;
» In Germany 14% of the population are interested in environmental issues. They are not the eco-buffs of the 90’s but are totally modern consumers, focusing on health issues and enjoyment of an intact natural environment;
» 50% of the German population still say they can not afford environmentally friendly products. They go to discounters. An aware and responsible company will make no headway with these consumers and should focus on the other 50% of the population that are more aware and care what they consume;
» Of the aware group of German consumers, 65% do sport and 93% enjoy outdoor activities like visiting cultural sights, trips into the country, etc;
» The elderly segment of the German population is growing and the 18-24-year segment is getting smaller. The elderly are becoming more active in nature — the 60-year old of today is active and fit and participates in the same activities as the 50-year old of the past.

Research by PriceWaterhouseCoopers LLP (PWC) on behalf of the European Outdoor Group (EOG) show:

» Nearly 60% of respondents buy less sustainable products than they would like to because the alternatives are not available, particularly alternatives that address the issues consumers care most about — climate change and packaging;
» Price is the number one inhibitor preventing consumers from buying more products that are better for the planet, or the people who make them. Almost 50% of consumers are unwilling or unable to pay the premium associated with more sustainable goods — respondents said they are only willing to pay a premium of around 20%;
» Availability of alternative products is another key barrier, with 20% of consumers saying it is a key reason for not buying more sustainable goods;
» Consumers want to make sustainable choices, but are hampered by unclear messages. Confusion, coupled with high prices, leads to a lack of trust among shoppers. Only 9-16% said they trust retailers and consumer goods companies in the area of sustainability;
» Nearly 20% of consumers say they are confused about the social and environmental trade-offs of their purchases At the same time consumers are looking to retailers for action and information;
» Packaging seems to be a major issue to consumers with more than 6 in 10 thinking that reducing the amount of packaging on pro-ducts is the most important action retailers or consumer goods companies could take to help the environment;
» Consumers are now at the point where they increasingly expect sustainable attributes to be an inherent part of the products and services they buy.

A study by The US-based Hartman Group in 2007 on the relationship between consumers and sustainability show:

» Approximately 30% of US consumers believe their purchases have greater impact on society than their votes;
» 93% of American consumers desire to live sustainably, but the majority struggle with how to do so;
» Sustainability is not yet a household word — just over half of the consumers interviewed were familiar with the term.